Another
$1,832,552,300 in SBA 7(a) loans were approved in the month of
June.

This makes it the
sixth straight month of improving SBA 7(a) loan
volume.

The year to date
total is $13,303,696,406; a 6.5% increase over the same period last
year.

Keep in mind that
the correlation coefficient between SBA 7(a) loan approvals and our economy's
Gross Domestic Product is a statistically significant 0.86.

_____________________________________Indices:

PRIME
RATE= 3.25%

SBA
LIBOR Base Rate July 2014 = 3.16%

SBA
Fixed Base Rate July 2014 = 5.32%

________________________________________

SBA
504 Loan Debenture Rate for July

The
debenture rate is only 2.87% but note rate is 2.92% and the effective yield is
4.952%.

________________________________________________AHEAD
OF THE YIELD CURVE

We are often
hebetated by the Federal Reserve when they meet on monetary policy to determine
interest rates.

As they wrap up
their meeting this week, the initial estimate on second quarter Gross Domestic
Product will be released. First quarter GDP had contracted sharply thanks to
last winter’s government shutdown that turned off the SBA 7(a) loan spigot. Now
that SBA loan volume has recovered, second quarter GDP should also have
recovered.

Also keep your
eyes and ears open for Friday’s report on jobs for
July.

Here is a summary
of net payroll employment and this week’s interesting little table of
data:

June
288,000

May
224,000

April
304,000

March
203,000

February
222,000

January
144,000

2013
2,074,000

2012
2,193,000

2011
2,103,000

2010
1,022,000

2009
-5,052,000

2008
-3,617,000

2007
1,115,000

2006
2,071,000

2005
2,484,000

2004
2,019,000

What does this
mean?

I don’t
know.

Through the first
half of 2014, the economy has added 1,385,000 payroll jobs - up from 1,221,000
added during the same period in 2013 - even with the severe weather early this
year. In June, the year-over-year change was 2.495 million jobs, and it appears
the pace of hiring is increasing. Right now it looks possible that 2014 will be
the best year since 1999 for both total nonfarm and private sector employment
growth.

The difference, or
spread, between them shrank to 1.56 percentage points, its least since February
2009.

The slope of the
yield curve—the difference between the yields on short- and long-term maturity
bonds—has achieved some notoriety as a simple forecaster of economic growth.
Long-term yields are reflecting forecasts for slower
growth.

The
bond market does not seem to think interest rates are going up anytime
soon.

Despite the
hebetating from the Federal Reserve, Fed officials are still inclined to keep
interest rates low for an extended period also.

__________________________________________OFF
BASE

Hebetation
often sets in during the dog days of summer.

Dog days? What is a dog day? Is it
so hot that dogs just lay around panting?

The term "dog days" has nothing to
do with dogs. It dates back to Roman times, when it was believed that Sirius,
the Dog Star, added its heat to that of the sun creating exceptionally high
temperatures. The Romans called the period dies caniculares, or "days of the
dog." The name Sirius seems to come from an ancient Greek word for "scorching"
or "sparkling." Sirius is the brightest star visible from either of Earth's
hemispheres. It's prominent in the evening during the northern hemisphere
winter. But its appearance in the summer has also been noticed for many
thousands of years. Each northern hemisphere summer, after being behind the sun
for awhile, the Dog Star reappears before dawn. Early Greeks and Romans blamed
Sirius for the heat in July and August. This is the time of year when Sirius
comes up either with the sun or shortly before the sun each day. It travels
across the sky with the sun during the daylight hours. The ancients believed
that the double whammy of the sun and Sirius actually caused the hot
weather.

Monday, July 14, 2014

From switching of
syllables in a mispronunciation of French chassé (a ballet movement involving
gliding steps with the same foot always leading), past participle of chasser (to
chase), from captare (to try to catch), frequentative of Latin capere (to take).

_______________________________________________

TIP OF THE WEEK

People are
sashaying into hotels and motels.

According to Smith
Travel Research, in year-over-year measurements, the hospitality industry’s
occupancy rate increased 4.4 percent to 66.0 percent. Average daily rate
increased 4.5 percent to finish the week at US$112.40. Revenue per available
room for the week was up 9.0 percent to finish at US$74.14. The 4-week average
of the occupancy rate is solidly above the median for 2000-2007, and is at the
same level as in 2000.

Right now it looks
like 2014 will be the best year since 2000 for hotels.

According to the
Small Business Administration, hotels and motels have accounted for more SBA
7(a) and 504 loans than any other business since 2001. Almost six percent of
all SBA loans are to hotels and motels. Hospitality also has one of the lowest
failure and charge off rates.

The
debenture rate is only 2.99% but note rate is 3.04% and the effective yield is
5.069%.

________________________________________________

AHEAD
OF THE YIELD CURVE

The economy seems
to sashay along.

Minutes from last
month’s Federal Reserve Board meeting on monetary policy revealed that Fed
officials are in no hurry to raise the central bank's benchmark short-term
interest rate even though inflation has picked up recently. "Some" policymakers
continued to voice concern about annual inflation that remains below the Fed's
2% target. "A couple" suggested the Fed "may need to allow the unemployment rate
to move below its longer-run normal level for a time in order to keep inflation
expectations anchored and return inflation to its 2%
target.”

Keep your eyes and
ears open for this week’s release from the Federal Reserve on industrial
production and capacity utilization.

One of the Fed’s
favorite gauges of the economy is the capacity utilization rate which measures
how much plants and factories are being used. The Federal Reserve watches
capacity utilization rates to see if production constraints are threatening to
cause inflationary pressures. Bottlenecks or shortages often lead to
inflationary pressures that would drive prices even higher. Several analysts
have pointed to a rate between 81% and 82% as a tipping point over which
inflation is spurred. The Federal Reserve typically won’t initiate increases in
interest rates until
then.

Here is what
capacity utilization rates have
done:

1997-
83.6

1998-
83.0

1999-
82.4

2000-
82.6

2001-
77.4

2002-
75.6

2003-
74.6

2004-
79.2

2005-
80.7

2006-
82.4

2007-
81.5

2008-
79.9

2009-
66.9

2010-
74.8

2011-
76.7

2012-
79.0

2013-
77.8

2014-
79.1

What does all this
mean?

I don’t
know.

Last month the Fed
reported that capacity utilization for total industry was at 79.1 percent, the
highest since June 2008. That’s up 12.3 percentage points from the record low
set in June 2009 and 2.4 percentage points higher than a year prior. Capacity
utilization at 79.1 percent is still 1 percentage point below its average from
1972 to 2012 and below the pre-recession level of 80.8 percent in December
2007.

What does all this
mean?

I don’t
know.

The 30-year
Treasury bond yield serves as somewhat of a long-term outlook on economic growth
and inflation expectations. But the security has at times been an early
indicator for movements in other Treasury maturities.

Last week’s
auction of $13 billion in 30 year Treasury bonds drew a yield of 3.369% compared
to June’s 3.355%.

The
long bond yield has dropped more than 50 basis points since the start of the
year.

The
bond market does not seem to think interest rates are going up anytime
soon.

The minutes from
the Fed reflect that some Fed officials are still inclined to keep interest
rates low for an extended period also.

__________________________________________OFF
BASE

No
more soccer players swaying and sashaying up and
down.

Now
we can play attention to things that really matter like Major League Baseball’s
All-Star game this week.

Does
the All-Star game really matter? Isn’t it just an exhibition game between the
American League and the National League?

Beginning
in 2003, the league that won the game has home-field advantage in the World
Series. The winning league would host the first two games of the best-of-seven
Series, then go on the road for three, then host for the final
two.

In
the 10 years since, the winning league also won the World Series eight times.
The National League’s Cardinals in 2006 and Phillies in 2008 are the only ones
to win without that advantage, although both won in five games and wound up
playing more games at home (three) than the team that was supposed to have
home-field advantage (two). We’ve had only one seven-game World Series since
the All-Star home-field rule. In 2011, St. Louis
beat Texas,
winning Game 6 and 7 at home. That rule seemed to matter a whole lot that
year.

Anyone
watching baseball over the last seven years has noticed that the game is skewing
towards younger, more athletic players. It's shifted the way games are played,
with pitching and defense dominating the sport.

While
there's incredible pitching on both sides, the National League clearly has the
better pitching while the American League has the advantage with the
bats.